Choosing a trustee for your living trust seems like it wouldn’t be that difficult. Most living trusts (also called revocable trusts and sometimes called grantor trusts) will name the person or people who set them up as the initial trustees. There are many other types of trusts, but the living or revocable trust is the type of trust that we will talk about today.

In the living trust, when the first spouse passes away, the other spouse would typically become the sole trustee. After the second spouse dies, the trust document should name the successor trustee or trustees. You should spend some time in choosing who that successor trustee or trustees will be. Common successor trustees are children, friends, other family members, professional fiduciaries, and banks.

Children: Frequently, married couples name their oldest child as the successor trustee. Couples may also name all their children to act together as co-trustees. This may be an ideal situation if: there has never been a divorce; there is only one child; the child lives nearby; the child does not work; and all the assets are investment accounts.

Even in that case, keep in mind that your children will likely have full-time jobs and adding the job of acting as trustee can be quite a strain since it is time-consuming and technical. At the time that your children need to act as the successor trustee for your trust, they will likely be struggling with their own grief. The administrative burden of taking care of your final business is overwhelming.

Friends: Acting as trustee is a very large favor to ask a friend. If you are going to ask a non-family member, make sure you have the provisions in your trust to pay them a reasonable compensation (trustee fees) for their time and efforts. Depending on the makeup of your estate and the items that are in your trust, the work involved can be very time-consuming. Several parcels of real estate or other non-cash items may create a full-time job for your trustee.

Professional fiduciary: A professional fiduciary is someone who knows all the ins and outs of acting as trustee and they do this job compensation on a routine basis. They don’t have to learn what to do, they don’t have emotional ties to decisions and they are required by law to have the best interests of the beneficiaries of the trust as their primary goal.

Banks: Banks will act as trustees, and are especially willing to act as your trustee if the primary portion of your trust is held in financial assets that are managed by that bank. Their fees are typically higher than professional fiduciaries, and their internal structure provides very strict guidelines for them to follow. If you have a group of beneficiaries that you suspect will cause one another some trouble, or if they are all out of state, a financial institution or a professional fiduciary is likely the best choice as a successor trustee. There will be tough decisions and it is much easier for a professional to manage.

Each successor trustee named in your document should be asked, notified and provided with a copy of your trust document. The successor trustees named in the document have the right to say no. If that happens, due to age, death, a situation at that time making it impossible for the named person to help, you need to have carefully named the next in line.

If you have not already named a bank, this is good place to have them listed as your backup plan. If you don’t have more than one listed and that person cannot serve, your trust may end up needing to go to court to have a court-appointed trustee. Staying out of court was likely one of your concerns when setting up your trust, so you want to make sure your trust has all the necessary provisions to remain out.

Make sure to include your children in these important discussions about your trust and estate matters. If you select someone other than your child, you may find that your children are relieved of the responsibility of acting as your trustee after you are gone. If they are named as one of the successor trustees, explaining that they have the flexibility to say no, is also very important. If you decide to have your children as your trustee, be sure they know what will be expected of them. They should know and be familiar with your estate planning attorney. There are tasks they will need the attorney’s help to complete. Asking for your children’s help now to get these matters squared away will be helpful to everyone when the time comes to act as trustee.

Tami Sipos has worked with families for over 20 years with their tax and financial planning issues, especially during times of critical transitions. Reach her at tsipos9@gmail.com.

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